We asked 1,000 millionaires how they got rich. Here’s what they said.

0:00You might think you know what the wealthy do with their money, but are you right?

0:04Brian Preston:Brian, I am so excited about this because our clients have literally spent decades building wealth and learning financial lessons along the way. And on today's show, we get to show you just what it looks like to live like a millionaire. I'm Brian, he's Bo, and we're financial advisors here to dive into what the wealthy actually do with their money, how they got there, and what you can learn on your way to building your great, big, beautiful tomorrow. With that, let's jump right in.

0:36Brian Preston:All right, Brian, so let's jump right in because, you know, every year we do this survey. We ask our clients all these questions. Let's talk about what do they actually look like? Who are these folks? And so just at a glance, let's start with the very beginning because it's one of the things we talk about all the time here, we want you to understand where you are and what your net worth is. You take everything that you own and subtract out everything that you owe, and that's your net worth. When we look at our clients, the average net worth for our clients is just under$3.5 million, but the median is about$2.5 million.

1:14Brian Preston:It's not skewed by the higher and lower ends. In the middle, about a$2.5 million median net worth amongst our clients at Abound Wealth. So if you're watching this and you're wondering, well, what is my net worth? We would invite you, hey, you've got to start this journey somewhere. Start keeping score of what you own versus what you actually owe. And I would invite you, go to learn.moneyguy.com and start tracking your net worth. Even if it's negative, I don't care if you just came out of school and you have a lot of student loan debt. I'm telling you, if you have a dashboard view of what's going on every year, you're going to be better for it and you're going to be able to manage your army of dollar bills that much better.

1:53Brian Preston:And Brian, this is the actual tool that you and I both use every single year when we do our net worth. It's not like this is something we built that we don't use. This is what we like to see front and center. So if we're talking about net worth, now let's talk about one of the things that leads to net worth. It's the size of the shovel. And when we look at the income, the average income, immediate income for our Abound Wealth clients, the average income is just under$350 ,000. But if you remove the outliers and look at the median, it's about$262 ,000. But look, I got to tell you, if I was outside looking in, I would say, I mean, of course, these people have money.

2:31They hire financial advisors. I think that this is not telling the full story as of, I think, take myself. When I graduated college, my starting salary is$28 ,500. That's where a CPA graduating in the 90s was. So this isn't where these people started out. Yes, they've created success. We're going to get into education. We're going to get into careers and other things. But I think you're going to see that how your journey starts does not have to be where it ends. And don't get thrown just because you see all the success. What I want you to do is use what we're sharing, the income, the net worth.

3:07Start thinking about the behaviors that can impact your life.

3:10Brian Preston:I love what you just said. How your journey starts does not define how it ends. And so while we wanted to start with net worth and income is to kind of show you what it looks like beginning with the end in mind. So now let's talk about what were the things that took place? What were the things that happened that allowed our clients to get to the place where they are? And the very first thing, I think this is really interesting, is we ask a question around education. Like, how were you trained? What sort of education did you receive? And I think the common thought is, well, okay, if you're going to be wealthy, if you're going to be successful, you must have gone to some prestigious school.

3:48Brian Preston:You must have gone to the Ivy Leagues. You must have gone somewhere that allowed you to build a network. You're that private school person, and that puts you in the position to be wealthy. But when we actually look at the numbers, that's not the case. Yeah, I love this because this is one of those things I found when I was started. You know, if you read any of the books out there, like The Millionaire Next Door, Everyday Millionaires, I love that we kind of get to echo these things by even interviewing and surveying our clients. You find out is that what you perceive is often wrong. And education is one of those.

4:21If you look at this, 76 % of our clients went K through 12 in public education. Even the college they went to, 61 % were public universities.

4:32Brian Preston:Now, there are some that went to private schools, but it's not the vast majority. A lot of folks just went to the same education as a lot of you out there. That was what their upbringing was. They didn't have to go out and get hundreds of thousands of dollars of student loan debt going into some prestigious university to get some prestigious degree to be able to attain wealth. that was not the track that they went on. And we don't think that that's necessary for you. If you're someone who's sending your students off to college, or if you're someone who's in college or thinking about pursuing higher education, we do not think it's a necessity to go out and have some crazy expensive, crazy debt-riddled education in order to be able to attain success.

5:19Brian Preston:It's why we talk about when you do go out to take out state loans, we want you to follow the first year financing rule, Meaning that whatever you accumulate in student loan debt, we don't want you to have more than what you anticipate your first year's salary can be. So if your first year salary coming out of school for an accountant in the 90s was$28 ,000, we would not want your total student loan debt to be more than$28 ,000. Well, and I think this is where a lot of people, because those first two slides, the net worth, the income, it's going to be somewhat of a, it's going to be polarizing.

5:53whereas I love that we're going to kind of build this thing up from the foundation now of education and show, no, these people are a lot more like us than you probably realize. And the first is on student loans, because a lot of people, you're going to say, well, these are all silver spoons. They must have just had it given to them. No, we found out that our clients, 52 % of them actually had to use student loans to get through college. So yes, they're just like us. They're having to go get student loans to make it through college. But that now I'll ask this question, did they follow the Money Guy rules before the Money Guy rules even existed?

6:26That's right. Because a lot of these people are now the age that this is just good instincts. And yes, we found out that 74 % of our clients actually followed the first year financing rule. And if they had student loans, they made sure they kept them below the balance of what their first year salary was going to be.

6:42Brian Preston:I think it's the idea that they intuitively recognized, man, I don't want to be carrying this debt load into my career. I don't want to drag this education along with me for years or even decades into the future. So not only were they forward-looking, they were also beginning with the end in mind. We asked them this question, for the job that you have now or for the vocation that you pursued, does it align with your field of study, the degree that you went out and got? And when we asked our clients, we found out that 76 % of our clients, three out of four of them, actually work in a field related to their field of study, meaning the degree that they got in college matches up what they do for a living.

7:26Well, now this is where, look, this one breaks my heart because I love education. I've often felt like it was holding the ladder of opportunity to make you a better version of yourself. And our clients are the best version of that, showing that 76 % of them are actually working in their field of study. Unfortunately, if you look at the general public, only 27 % of the typical American works in their field of study. So that means a lot of people, something that should be a benefit to you and make you a better version of yourself. For a lot of you, it's creating a trap. You're ending up with all of the bad stuff, the student loans, the high interest rates, and then you're just not getting the benefit if you're not even working in the field of study.

8:07Guys, this is why we gotta tell you, if you're going to make sure education is going to be an amplifier of your wealth building journey, Be a good allocator of resources. I want you to make sure, and by the way, a lot of you, maybe you're past this. Think about this for your kids. Think about this for your relatives. Think about this for your neighbors down the street. Pay this knowledge forward. Don't go to college unless you know what you're going to do and where you're going to end up because it's that expensive now that you gotta be very deliberate with what the purpose and the why is on your cost of education.

8:40Brian Preston:Now, I love what you said, Ron. You said that education is the ladder that you can crawl up to change the circumstances that you're in. And it's a wonderful tool, but it's not a necessity. In the same way, we talked about the average income for our clients. A big shovel is a wonderful tool, but it's not a necessity in order to build wealth. But I'm going to argue this next one. This one is a necessity. This is something because it is more behavioral. and this is something you can control no matter where you came from, no matter what your shovel looks like, and that's your savings rate. How much you were willing to lean into the first ingredient of wealth creation, how much you're willing to exercise discipline and defer gratification in the future will have a direct implication on how wealthy you are able to become and how healthy your savings rate is.

9:32For my very detail-oriented people, when we use, because this is part of our personalities, When we say savings, we're using that interchangeably with also investing to a large degree. So this means this is your army of dollars that you're putting to work so that you don't have to work so hard in the future with your brain, your back, or your hands. And I'm happy to report, if you look at the data of our millionaire clients, 71 % of our working abound clients save greater than 20%.

10:02Brian Preston:What I love about this is to be a client of Abound Wealth, you have to have already attained a certain level of investable assets. Well, even though our clients have had financial success and reached financial success, they did not arrive at the conclusion, okay, well, I'm done, I'm finished, I can put that aside. No, those that are working are still committed to deferring gratification and building towards a great, big, beautiful tomorrow. And I bet if you were to ask them individually, while they might not have started as early or as young as they wanted to, what they would tell you is I started and I never stopped.

10:36Brian Preston:I started and I consistently got better at deferring gratification into the future. And I figured out for myself, okay, I need to save this much money. If I save this much money, then I'll be able to get to the level of wealth I'm trying to achieve. Well, a lot of you might be exactly like I was when I graduated college is that I was ambitious and I was trying to maximize every dollar earned, but I just didn't know what I didn't know and I didn't know what I should be doing. So I would encourage you, I want you to go out to moneyguy.com slash resources. And if you're curious, how much should you save and invest for the future?

11:07We've created a resource where you actually say, here's what your current age is. When you think you want to retire and build and save for financial independence, we'll tell you your savings and investment rate to shoot for based upon actual math that we've done on the backend. So you don't have to spend all those calories of mental horsepower. We've done the homework for you. Take us up on that offer.

11:32Brian Preston:So savings rate is this affirmative action that you take. I'm going to actually put effort into doing this thing. And yet most Americans fall short on that. But then there's another action that sometimes we have to, when it comes to wealth building, think about the decisions that we're not making, the consumption decisions that make us as millionaires look different from our peers. And for most folks, the two most expensive things you're ever going to spend money on are automobiles and homes. And so we want to ask, okay, when we think about how our clients pursue those huge purchases, how did they do it and how they think about it?

12:11Brian Preston:And we found, what did we find? We found that 63 % of our clients said that for their most recent car, they were able to pay cash. So over half of our clients are in the financial situation where they can pay cash for a car today, but that wasn't always the case. Yeah, but I think that, look, I want to give the context and then I see where you're taking it, but I want to give the context of the person on the street. 81 % of new cars are purchased or financed. And we know that most of those cars are financed for like 70 plus months. At least. I mean, it's crazy. So a lot of Americans are taking these big purchases, especially the auto, is this is their first step in rewarding themselves.

12:59I think about a lot of college kids. I even was talking to somebody and we were talking about the behaviors and like you sacrifice, sacrifice. You go to school, go to school and you get out and you're like, I'm gonna reward myself with a new car. But you did this. Oh yeah. I mean, a lot of people, I've seen so many peers that they think this is what I'm gonna do to show my peers that I'm good. I finally made it. And I'm successful and I've made it. I'm gonna go buy a car. And I'm here to tell you this thing is napalm. Instead of you building wealth, you're going to drive your wealth and that's not successful.

13:28Now, I understand if 63 % of our clients paid cash, that's for after they probably had a pot of money behind them. I know when I needed to, in the beginning of my journey, trade my time for wages to build, I needed reliable transportation. So how many of our clients on their first car were just like the general public? If 81 % of the general public's financing their cars, how many of our clients financed their first car?

13:53Brian Preston:71 % of our clients said that when it came time to buy my first car, I could not pay for it in cash. I had to borrow money. I had to finance. So we want people to understand it's okay if you have to use debt to get yourself going to your J-O-B. But you better have some foundational rules because just as quickly as you truly can afford it, we want you paying cash for your vehicles. Cash is always the best way to pay for things that are rapidly depreciating. But if you're in that desperate situation where you need reliable transportation, follow 23.8. And if you've never heard of 23.8, let us explain it to you.

14:3220 % down, that way you make sure you actually own a little bit of equity into this car that you're purchasing. You make sure that you don't finance it longer than three years. Look, the dealership, they're gonna wanna take you out to 84 months. Don't let them do that. They'll say, you can afford anything, a few hundred dollars a month. No, three years, that will keep your back pocketing your purse honest and make sure that your payments don't exceed 8 % of your gross income. This will keep you safe.

14:57Brian Preston:Now, it's not just how you buy the car that matters. It's how you use the car, how you actually consume that purchase. So we asked our clients this question. When you purchase a new car, how long do you drive it? And we found that 83%, the vast majority of our clients, when they buy a car, they drive it for greater than seven years. They're not the people that are changing out and replacing a brand new car every two to three years. Do you see, though, this is why we use the term financial mutant. It's because you're going to find out that our millionaire clients, just like we process the world a little differently, I bet you're watching a personal finance show right now.

15:39You process the world differently. So it's not going to surprise you that 65 % of Americans drive cars for five years or less. You heard me say these cars depreciate like a rock. I mean, they go down in value very rapidly. So you're actually rewarded if you drive cars for seven plus years because that means you have less depreciation. You're not making more bad decisions. You're actually just driving these depreciating vehicles longer. There's a lot of success built in that deferred gratification and that consistency of how you use vehicles.

16:12Brian Preston:All right, so that's cars. Now, let's talk about homes. For most folks, this is often the largest purchase you will ever make in your life. And we know that right now in this country, as we've seen home prices run up and increase, we know that the median home value in the U.S., according to the Federal Reserve, is about$403 ,000. So the question becomes, okay, if that's the median, how do our clients stack up? What do their houses look like? Like we've already shared with you that the average net worth of our clients is around three and a half million dollars. The median net worth is about two and a half million.

16:49Brian Preston:But when it comes to homes, when it comes to their main residence, the median home value for our clients is about$700 ,000. The average home price of our clients' current market value is right at about$850 ,000. This is one of those weird distortions is coming from just what's happened in the housing market in the last five years. I think a$700 ,000 median house probably five years ago was what? $450 ,000? Maybe even less than that. I mean, so that's why it also depends on the market you live in. We do have clients that live in high cost of living areas where these houses can go well beyond a million, $2 million.

17:26But I think overall, the important thing is to understand, hey, don't let house is shelter, but you need to be careful how you structure it because it can be such a big expense category in your financial household.

17:39Brian Preston:Well, and I think a lot of people are under this impression that, okay, well, houses have gotten so expensive and I know I've got to put 20 % down and I just, the house keeps running away. I'm never going to be able to own a home. It's just not realistic in the world in which we live. And so we said, okay, let's ask our clients, when you bought your house, when it came time for you to buy your first home and you're finally crossing into the home ownership category, what was your down payment? How much did you save? How much you put down? And we found that 79 % of our clients, almost 80 % of our clients put down less than 20 % on their first home.

18:18Brian Preston:Brian, did you put down 20 % of your first house? No, I did not put down 20 % on my first house. I did not put down 20 % on my first house. And we believe that when you go to buy your first home, you do not have to put 20 % down to be able to come into homeownership. Yeah, I think that hopefully this liberates some of you who might be sitting on the sidelines. You know, for life purposes, it makes sense for you to buy this house for your growing family. And you fear this because you had so many talking heads telling you 20 plus percent forever. And then here you are, you find out that the majority of people who are really good with money put down a lot less than 20%.

18:53I think I put down 5 % on my first house. I think I was three and a half on mine. So it is one of those things. But also, look, we live in unique time And we've done shows on, is it better to buy versus rent in this current marketplace? And in a lot of cities, it's better than rent. And that's one of those things. That's why I would encourage you, don't feel like you have to get pressured into this. I want you to go out to moneyguy.com slash resources once again. We have a home buying calculator. We also have home buying checklists. So you can go through and figure out if you go through the decision matrix, does this even make sense based upon how often I'm moving for my job or my lifestyle?

19:26Kyle, go use these tools and resources to know that you're living your best life and not forcing the decision.

19:33Brian Preston:All right, Brian. So we've talked about their net worth. We've talked about our client's income. We've talked about how they were educated. We talked about their large major purchases. But now let's talk a little bit about their mindset and their plan. Because you guys know, if you've listened to us for any amount of time, we've come up with a financial order of operations. Brian, you want that thing up for me? I got it here somewhere. Come on, there it is, there it is. It is our nine-step process to help you understand what to do with your next dollar. And the way that we were able to develop the financial order of operations was both through our personal experiences, building our own wealth, as well as our professional experiences, interacting with clients who've been able to build wealth.

20:10Brian Preston:And so we said, okay, let's put this to the test. How do our clients perceive and how did they actually realistically live through the financial order of operations? Because wealthy folks, folks who've been able to build wealth, understand the value of what you're doing with your dollars and what you're not doing with your dollars. So we said, okay, let's figure out right off the bat, one of the very early steps, the financial order of operations is high interest debt. It's step number three. And a lot of Americans fall into this trap. I think the average credit card balance carried from month to month right now is right around$6 ,000 carried over where you're paying punitive interest rates.

20:49Brian Preston:So we asked our wealthy clients, question number one, do you use credit cards? Some people out there would suggest don't ever use credit cards. You just don't get them. You don't use them. We don't fall into that camp. And we found that over 97 % of our clients, almost all of them said, yeah, we use credit cards. We get points. We get cash back. We use them as a tool in our financial tool belt. But 99 % say, you know, because remember, we always say credit card use, A-OK, credit card debt, meaning we're paying it off every month. No way. We do not want to have an hour. Look, I'll be honest. When I saw this one, I was like, who in the world is here at Abound Wealth is carrying credit card debt?